Thursday, May 14, 2015

Inter Parfums (IPAR) Q1 2015 Earnings

                                                                                                                Senior Analyst, James Molinell
Inter Parfums (IPAR) released Q1 2015 earnings Monday, May 11th. The company beat Wall Street Consensus earnings estimates by $0.04 but missed on revenue by $500,000. The company reported $0.32 per share of net income, beating estimates of $0.28 per share. First quarter revenue came in at $109.2 million missing estimates of $109.7 million.

Inter Parfums expects full-year earnings to be $0.98 to $1.00 per share, with revenue of $470 million. Inter Parfums shares have been up 16% since the beginning of the year but saw the biggest rise on Wednesday, May 13th. The company was a big mover as it saw shares rise over 5% on the day. The upside was caused by a decent earnings report on Monday, which led to more shares changing hands than in a normal session. Although the earnings report wasn’t great, it provided confidence in the stock for investors; a sense of stability.

Inter Parfums CEO Jean Madar spoke a lot about foreign currency exchange issues in 2015 as he states “we incurred foreign currency losses of approximately $2 million in the 2015 period versus a negligible foreign currency gain in the 2014 period.” In large part this loss has to do with the weakened Euro in 2015 but is not expected to continue into the long run. Company guidance for 2015 assumes that the dollar remains at current levels. In my opinion this is a rather conservative stand point which most likely will lead to beating guidance for quarters to come.

As of Thursday, May 14, 2015 the stock is priced at $33.24 being down 0.39% on the day.

Thursday, May 7, 2015

AFL-Q1 2015

Aflac Inc. (AFL) reported Q1 2015 with operating revenue of $678M, a decline of 12.5% YOY. Net income came in at $663M, a decline of 9.43% YOY. EPS for the quarter was $1.54, 8.89% lower than Q1 2014. The negative figures are mainly due to stagnant revenue streams coming from Japan, their main earnings contributor. Total revenue in Japan plummeted 12.6% YOY to 3.7B. The primary reason why there was such a huge drop in the revenue data coming from Japan, was because the firm is experiencing alarming sales deceleration from the WAYS products and endowment. This led to an overall drop of 29.8% in first sector sales. Also, Premium income, one of their main sources of capital to invest, also decreased 13.5% to $3.1B.

Despite all the negative data that came from Japan this recent quarter, the company experienced strong growth of sales in the cancer insurance products. Following the amazing Q4 2014, reception of the cancer insurance products has led to an increase of 118%. In terms of firm’s distribution side, their strategic alliance with Japan Post has led to beneficial outcomes. This alliance has made Aflac Japan the leading industry and pioneer of cancer insurance. Going forward, the alliance represents the future of Aflac in Japan and most importantly its presence as an industry leader.

After updating the model, there is ~11% left of upside in the company. I still believe in the potential of the company, as it continues to prove its leadership in the insurance business. There are still concerns regarding the sales in Japan and how the company would hedge against the Yen/Dollar exchange. But going forward, I think that the stock is still a great investment with a great potential for growth.

RF-Q1 2015

Regions Financial (RF) released Q1 2015 financial statements and reported earnings of $218M, .08% increase YOY. Also the company reported diluted EPS of $.16, 27.3% lower compared to Q1 2014. The revenue results reflect the successful strategic planning of the executive board. The company continues to focus on diversifying the streams of income, creating operating leveraging and efficiently using capital. This past quarter, the company grew loans and deposits; their main sources of revenue. Their loans part of the business was 22.8M, a 1% increase YOY. Deposits balance grew by 3% YOY to 97.5M, exceeding the management expectation. Their Wealth management division posted impressive results as well, representing an 8% growth and an increase of AUM by 5% to 2.9B. The section of Wealth Management that show the best growth was insurance, showing a 13% growth.

In terms of the energy lending portfolio. The company continues to monitors the market in order to stop any impact that the oil’s price can have on their loan portfolio. Despite the ongoing risk profile that the volatility of the oil market has placed on the portfolio, the firm has not seen any financial stress within their customers. As it turns out, RF’s customers are beginning to benefit from lower oil prices. Net charge-offs for Q1 2015 were $54M, -34.15% YOY. This figure represents total net charge-offs to average loans of 28bps, the lowest level that the company has experienced in more than seven years. However, the firm continues to work with clients to find efficient ways to mitigate risk.

After updating the valuation portion of the model, the stock has 8-10% upside left, however, the upside can be higher if the Federal Reserve decides to increase interest rates. The rise in interest rates can increase RF’s net interest margins, thus generating more profit that would enhance the overall value of the firm. In regards to this, the fed is still hesitant on when the spike will take place due to fears of stagnant economic growth. I believe that the company has moved to more revenue generating vehicles that in the long run, will enhance the overall value of the stock.

Wednesday, April 29, 2015

CIT Group Q1 Earnings Report:

CIT posted an EPS of $0.59 and revenue of 423.8M and both numbers missed estimates of $0.73 and revenue of 456.74M. Most of the lower profits came from its North American finance business, and lower net interest margin. CIT had a net interest margin of 4.34% last quarter, and it dropped to 4% this quarter. These lower margins will aid in the acquisition of OneWest bank expected to close mid of 2015. CIT Group is also extending their stock buyback program by looking to acquire $200M through share repurchase. Although CIT missed estimates, they are still up on net finance revenue from last year. CIT Group’s management does not view this quarter as a setback, because this quarter was in line with internal expectations. With General Electric scaling back their financial arm, CIT Group can take advantage of this opportunity since it fits their business model more than General Electrics. CIT Group also increased assets this quarter from last by increasing the amount of deposits they have.

Tuesday, April 21, 2015

Lam Research (LRCX) 2015 Q1 Earnings

Lam Research Corporation (LRCX) reported earnings for the fiscal quarter ending March 29th, 2015 on April 20th, 2015. Earnings per diluted share came in at $1.40, beating consensus' estimates of of $1.30. Management was upbeat about guidance going forward despite capital spending cuts in the chip manufacturing space by semiconductor giants Intel (INTC) and Taiwan Semiconductor (TSM)

Earnings per share is up about 14% in comparison to this time last year, and management expects 4Q EPS to range between $1.39-1.53 with estimated revenues of anywhere between $1.41 billion to $1.51 billion. Lam Research believes through an assortment of chip products, it can maintain high revenues. The stock rose 9% in the market's after hours and reached $78.50 and is currently trading at about $77.90.

LRCX saw it's increase in EPS due to an increase in revenues. Margins remained relatively constant and if the company can live up to management's expectations to even higher revenues, then Q4 EPS should increase yet again. However, it is important to note that a lot of Lam's optimism is banking on an overall market decrease in 3D Nand prices that would drive demand up which would prove beneficial for Lam.

Chip manufacturer's Applied Materials (AMAT) and KLA Tencor (KLAC) also saw their share's price rise in accordance with Lam's which reflects investor's excitement for the chip manufacturer space.

Saturday, April 18, 2015

Citi posts solid first quarter earnings, surprises 9%

Citigroup reported first quarter earnings on April 16th, 2015. Earnings per share came in at $1.52 per, above consensus estimates of $1.39 per share. Revenue for the quarter was $19.8 billion, down 2% year over year and missing street estimates of $20 billion.

Lower revenues in Citi’s Corporate/Other, Institutional Clients Group, and Global Consumer Banking were offset by lower operating expenses. Operating expenses for the quarter were $10.9 billion, down nearly 10% year over year. The decline in expenses was driven mainly by cost reduction efforts, reduced legal and related costs and repositioning charges. However, the firm experienced higher regulatory and compliance costs.

The trend of improving credit quality continued into first quarter. Total allowance for loan losses was $14.6 billion (2.38% of total loans) down 2.87% year over year. Loans and deposits decreased 6% and 7% year over year to 621 billion and 899 billion respectively.

Overall, a positive first quarter performance for Citi. Although missing revenue, EPS beat by a significant amount. Continued expense management will continue to benefit Citi in the tough interest rate environment. Citi traded up around 2.5% after earnings were released but those gains were completely offset after poor market performance on Friday. The stock closed the week at $53.07.

PNC Financial Services beats 1Q2015 earnings but misses on revenue

PNC Financial Services reported first quarter earnings on April 15th, 2015. EPS for the quarter came in at $1.75, beating estimates of $1.71 per share, for an earnings surprise of 2.3%. First quarter revenue was $3.73 billion against estimates of $3.75 billion and down 1% year over year. Revenue in the first quarter was mainly driven by strong performance in the Retail Banking segment, exhibiting very strong evidence of our investment thesis.

The results were mainly driven by a fall in the provision in credit losses and increases in noninterest income, however partially offset by higher expenses and lower net interest income. Noninterest income and expenses came in at $1.66 billion (+5% YoY) and $2.35 billion (+4% YoY), respectively. Higher expenses were due mainly to investments in bank infrastructure and technology for its banking transformation initiative. Also, the company is about 30% complete with its goal of reducing costs for 2015 by $400 million. Net interest income for the quarter fell to $2.07 billion, down 6% from the previous year. PNC’s net interest margin fell 44 bps to 2.82% year over year.
PNC’s ability to source cheap funds and expand its balance sheet during the quarter should pay off when interest rates begin to rise. Loans grew 3% and deposits grew 6% compared to the previous quarter, despite the tough interest rate environment. Credit quality improved significantly YoY: Provision for credit losses were down 43% to $54 million, while net charge offs fell by about the same percentage to $103 million.

Overall, a decent performance for PNC despite missing on revenue. The performance supports our investment thesis of higher noninterest income and lower expenses, with modest loan growth. This combined with stronger credit qualities and a strong focus on customer satisfaction should pay off for PNC in the long run. PNC has traded down around 2.5% to $90.93 since earnings were reported.